empty
14.08.2024 12:18 AM
Key labor market and inflation data will reduce uncertainty regarding the pound. Overview of GBP/USD

The Bank of England started its easing cycle on August 1, and the market expects a further 50 basis points cut by the end of the year. The Bank of England's chief economist, Huw Pill, voted against the cut and warned against expecting more rate cuts in the near future. The market considered this and currently assigns less than a 50% probability to a rate cut next month.

Today's agenda includes updated data on the labor market and inflation. Labor market data for July was released this morning, and it turned out to be significantly unexpected. Average wage growth, excluding bonuses, slowed from 5.7% to 5.4%, which seems like good news in terms of slowing inflation. However, forecasts had suggested a fall to 4.6%. Now, the likelihood of a BoE rate cut next month has become even less likely, which is a frankly bullish signal for the pound.

This image is no longer relevant

At the same time, unemployment rose from 4.4% to 4.7%, and the number of jobless claims was 135,000, compared to a forecast of 14.5%. The sharp increase in claims indicates that the economy is closer to a recession than previously thought, and this figure, on the contrary, provides grounds to continue lowering rates.

As we can see, the market received two opposing signals on Tuesday and reacted with only a slight spike in volatility. It seems that significant conclusions will be drawn on Wednesday after the release of the consumer inflation report.

The NIESR Institute, analyzing various statistical data (CPI, PPI, 10-year UK government bond yields, effective GBP exchange rate, BoE bank rate) within its own forecasting model, expects July inflation to be between 2.2% and 2.4%. This is higher than the previous month and aligns with market forecasts. Interestingly, the forecasts suggest that inflation will decrease to 2% in September, which supports further rate cuts, but then, due to accumulated effects, it will rise back to 2.9% by early 2025, which suggests caution regarding rate cuts.

As we can see, the uncertainty is too high to make a definitive forecast. The market balances expectations for the Federal Reserve and BoE rates, which provides a driver for movement in either direction. However, the accumulated uncertainty needs resolution.

This image is no longer relevant

The net long GBP position decreased by $3.0 billion to $5.9 billion over the reporting week. Despite the significant decline, the bullish bias persists, and although the calculated price has lost some momentum, it is still above the long-term average.

Kuvat Raharjo,
Analytical expert of InstaForex
© 2007-2025
Select timeframe
5
min
15
min
30
min
1
hour
4
hours
1
day
1
week
Earn on cryptocurrency rate changes with InstaForex
Download MetaTrader 4 and open your first trade
  • Grand Choice
    Contest by
    InstaForex
    InstaForex always strives to help you
    fulfill your biggest dreams.
    JOIN CONTEST

Recommended Stories

What to Pay Attention to on April 16? A Breakdown of Fundamental Events for Beginners

A few macroeconomic events are scheduled for Wednesday, but some important reports will be released. However, the current key issue is not the reports' significance but how the market will

Paolo Greco 07:06 2025-04-16 UTC+2

GBP/USD Overview – April 16: The Pound Sees No Limits

On Tuesday, the GBP/USD currency pair continued its upward movement. Although this rally was not as strong as last week's surge, the British pound kept rising steadily, with barely

Paolo Greco 03:35 2025-04-16 UTC+2

EUR/USD Overview – April 16: The Euro Stalls Awaiting New Tariffs

The EUR/USD currency pair mostly remained flat throughout Tuesday. Although both pairs are in an upward trend, the euro and the British pound have recently not been trading in sync

Paolo Greco 03:35 2025-04-16 UTC+2

EUR/USD. Gloomy ZEW Indices Put Pressure on the Euro

The euro reacted negatively to the ZEW indices released on Tuesday, which reflected growing pessimism in the European business environment. The key indicators dropped into negative territory for the first

Irina Manzenko 01:08 2025-04-16 UTC+2

The Euro Scared Itself with Its Own Momentum

The euro's surge to the area of three-year highs became possible thanks to Germany's fiscal stimulus, Donald Trump's trade policy, and a capital outflow from North America into Europe. When

Marek Petkovich 01:08 2025-04-16 UTC+2

XAU/USD. Analysis and Forecast

Today, gold is rising, trading near the all-time high reached the previous day, amid growing uncertainty surrounding the US-China trade wars. Gold is gaining ground today, remaining close

Irina Yanina 12:18 2025-04-15 UTC+2

USD/JPY. Analysis and Forecast

Today, the Japanese yen is struggling to extend its gains due to optimistic developments regarding trade negotiations and the postponement of tariffs. President Trump's statement about possible exemptions

Irina Yanina 12:08 2025-04-15 UTC+2

Trump Will Either Win or Lose. Is There No Middle Ground? (Potential Renewed Decline in #SPX and Bitcoin)

On Monday, markets calmed slightly amid Donald Trump's apparent backpedaling on the trade barriers he had imposed on America's trading partners. It gives the impression that the U.S. president

Pati Gani 09:46 2025-04-15 UTC+2

The Market Celebrates a Ceasefire

While there is still no peace in the trade conflict, a semblance of a ceasefire has appeared. The White House is beginning to frantically realize it has gone

Marek Petkovich 09:08 2025-04-15 UTC+2

What to Pay Attention to on April 15? A Breakdown of Fundamental Events for Beginners

Quite a few macroeconomic events are scheduled for Tuesday, but under the current circumstances, macroeconomic data mean little to the market. They might have a short-term local impact

Paolo Greco 06:29 2025-04-15 UTC+2
Can't speak right now?
Ask your question in the chat.
Widget callback
 

Dear visitor,

Your IP address shows that you are currently located in the USA. If you are a resident of the United States, you are prohibited from using the services of InstaFintech Group including online trading, online transfers, deposit/withdrawal of funds, etc.

If you think you are seeing this message by mistake and your location is not the US, kindly proceed to the website. Otherwise, you must leave the website in order to comply with government restrictions.

Why does your IP address show your location as the USA?

  • - you are using a VPN provided by a hosting company based in the United States;
  • - your IP does not have proper WHOIS records;
  • - an error occurred in the WHOIS geolocation database.

Please confirm whether you are a US resident or not by clicking the relevant button below. If you choose the wrong option, being a US resident, you will not be able to open an account with InstaForex anyway.

We are sorry for any inconvenience caused by this message.